A promissory note is a written obligation to pay a sum of money within a certain amount of time. This form of contract binds a borrower’s pledge to repay a lender within a certain time frame, and all parties must sign it.
A promissory note differs from a contract. A contract lays out all of the provisions of a binding contract in detail. Only the following are covered by a promissory note:
- The deadline for someone when the money is to be paid.
- How should an individual or organization be paid?
- How much should an individual or organization pay?
Here are our top 10 tips to help you write promissory notes;
Add personal details
Start by filling in the personal details for each group in the first paragraph. Use the legal names, addresses, phone numbers, and the date the contract will be signed for each side. Note that all the details must be written in clear words and without any mistake. Any ambiguity in the details can lead to a loss.
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Make sure that both the borrower and the lender have signed the promissory note. The signatures of all parties are required for a promissory note to be enforceable by law. You can use the promissory note template by CocoSign and the parties to sign them online under multiple layers of protection.
Moreover, you can save your precious documents on the CocoSign Desk too. CocoSign also allows you to edit the agreement if you want as time goes by.
Describe the Terms
The agreed terms of payment should be specified in the note, which must include:
- The loan theory or the sum lent at the outset,
- the rate of interest
- Maturity date, or the date on which the loan is due.
- While the rules differ from place to place, the creditor should always sign a promissory note. Some law requires both the payee and the creator to sign the check. Others need a witness, though it’s a good idea to get all signatures acknowledged by a notary.
Clearly Define If Interest is included.
Find out how much interest you’ll pay and how long you’ll have to pay back the loan. If the debt is repaid in one lump sum, note the due date as well as the total amount. If the repayment is made in installments, specify the deadline for each payment and the price payable. Also, include fines or damages that might be imposed if the creditor fails to make a payment on time.
Schedule repayment terms
When planning your repayment schedule, consider what you can handle first, and then build a plan that keeps up with the payments. You will create a repayment plan that is more in line with the company’s projected earnings with loans. The first deposit on a promissory note is usually within 30 days. However, you could be given a six-month grace period before being required to make monthly payments under an interest-only deal.
You only have a monetary responsibility to repay the loan. However, a lender can need a protection arrangement, which means you guarantee or provide some kind of collateral.
The termination date of the Note
The last installment may be the day the promissory note expires in the case of an expensed loan that is a loan paid off in a sequence of even and equal installments on a given date. A bubble payment, stating a date by which the entire outstanding balance is owed, may also be included in a contract.
Date when installments are to be paid
Specify that when the payer is supposed to deposit the installments each month. The first installment is usually due on the first or second of the month, with subsequent payments payable on the exact dates after that.
Much like signing a check, the balance lent should be written in numbers and read out in sentences. This eliminates the possibility of the due number being misunderstood or changed. If the promissory note is for $10,000, it should also include the words “ten thousand dollars only.”
Details of each payment
If several payments are to be made, the promissory note must specify the frequency and the sum of each payment along with the date and time.